EU Expected to Impose 34% Countervailing Duty on Hynix Products

The European Union is expected to impose a 34% countervailing duty against Hynix Semiconductor. Following the U.S. Commerce Department’s decision to impose a 44.71 countervailing duty against the troubled Korean semiconductor maker, the EU’s anticipated ruling will deal a fatal blow to Hynix.

The Ministry of Foreign Affairs and Trade said Friday that it received a draft proposal containing the possible imposition of a 34% countervailing duty against Hynix by the EU.

The EU’s executive leadership will decide a rate and timetable for its countervailing duty next month after consultation with its members based on the draft proposal.

It was found that 13 nations out of the EU’s 15 members were in favor of imposing the countervailing duty against the Korean chipmaker, except for France and the Netherlands. Previously, EU authorities made a preliminary ruling by setting a 33% interim tariff on Hynix chips for 4 months since last April.

The Korean government complained to the EU that its decision to impose a countervailing duty against Hynix chips was unfair and is planning to refer the case to the World Trade Organization this month.

In case the EU finally decides to impose a countervailing duty against Hynix in August, a total of 60 days will be given for negotiations between the Korean government and the EU. If talks between the two sides fail to reach agreement, a panel of officials appointed by the two countries or the WTO (which will determine whether the EU’s decision to impose a countervailing duty against the Korean chipmaker is justifiable or not) will deliberate over the case for 6 to 9 months.

The Ministry of Foreign Affairs and Trade expects the EU to make a final decision on the rate and timetable for imposing a tariff in May 2004.

Meanwhile, the Ministry sent a letter last month to Rinet Daily, the American Ambassador to the WTO, refuting the U.S. Commerce Department’s decision. “The U.S. failed to prove allegations that the Korean government provided financial assistance to the company. Therefore, the U.S. decision on the imposition of the countervailing duty against Hynix is in violation of international trade rules,” it stated.

The Korean government referred the case of the U.S. Commerce Department decision in June to impose a 44.71% countervailing duty on Hynix products to the WTO.

Eun-Woo Lee Jei-Gyoon Park libra@donga.com phark@donga.com